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TMI Blog2025 (3) TMI 813X X X X Extracts X X X X X X X X Extracts X X X X ..... hus reiterated its earlier position that the money and funds which were held in NNPLC were in fact unaccounted income of the assessee and thus the provisions of Section 68 of the Act being attracted. We are undoubtedly confronted by a clear and categorical finding rendered in the first round of litigation and where the Supreme Court had in unequivocal terms held that the material on the basis of which the AO formed an opinion to reopen was sufficient. We are thus of the firm opinion that sufficient material existed before the AO and which would have justified the power to reassess being exercised. Whether entire action is based on a wholly incorrect reading of the DRP's order? - As his submission that the said order has been misconstrued and misinterpreted and thus the impugned action liable to be set aside on this score. We find ourselves unable to sustain this submission bearing in mind the undisputed fact that this was not a contention raised, urged or canvassed either before this Court or for that matter before the Supreme Court [2020 (4) TMI 133 - SUPREME COURT] In fact the Supreme Court had answered question (i) in the affirmative upon noticing the reliance which was place ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AO, DRP and ITAT reached in A Y 2009-10 that floating of subsidiary companies by the assessee outside India and raising money through loss making companies were actually sham transactions and after lifting corporate veil that assessee and subsidiary companies were found to be one and the same and that the assessee routed its own undisclosed income through these companies, I have a reason to believe, on the basis of these credible information that Rs. 405.09 crore was actually income of the assessee company taxable in India which has escaped assessment. It is evident from these facts that the second proviso to Section 147 is clearly attracted in this case. 45. In view of the facts and circumstances of the matter briefly mentioned as above, I have reasons to believe that the Step Up Coupon Bonds of USD 100 million deposited in the bank account of M/s NDTV Network PLC, UK (''M/s NNPLC") is financial interest of the assessee, which was a company based in UK. Therefore the case of the assessee is covered by the second proviso of section 147 of the Income Tax Act, 1961. 46. Therefore. I have a reason to believe that the assessee company, directly or indirectly has substantia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtually non-functioning company and thereafter get back only 72% of their original investment. According to the assessing officer "The natural inference could be that it was NDTV's own funds introduced in NNPLC in the grab of the impugned bonds." The details of the investors are given in this communication giving reasons. Mention has also been made of complaints received from a minority shareholder in which it is alleged that the money introduced in NNPLC was shifted to another subsidiary of the assessee in Mauritius from where it was taken to a subsidiary of the assessee in Mumbai and finally to the assessee. NNPLC itself was placed under liquidation on 28.03.2011. Therefore, the assessing officer was of the opinion that there were reasons to believe that the funds received by NNPLC were the funds of the assessee under a sham transaction and that the amount of Rs.405.09 crores introduced into the books of NNPLC during the financial year 2007-08 corresponding to the assessment year 2008-09 through the transaction involving the step-up coupon convertible bonds pertains to the assessee. The last portion of the communication dt. 04.08.2015 giving reasons to the assessee reads as f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the course of original assessment which led to the finalisation of the assessment order and undisclosed income escaping detection? (iii) Whether the notice dated 31.03.2015 along with reasons communicated on 04.08.2015 could be termed to be a notice invoking the provisions of the second proviso to Section 147 of the Act?" 7. Insofar as Question (i) is concerned and which pertained to whether a valid reason to believe could be said to have existed with respect to income having escaped assessment, the Supreme Court observed as follows:- "13. We would like to make it clear that we are not going into the merits of the allegations made against the assessee. At this stage we are only required to decide whether the revenue has sufficient reasons to believe that undisclosed income of the asseessee has escaped assessment and therefore there are grounds to issue notice. Obviously, during the assessment proceedings the assessee will have the right to place material on record to show that the transaction in question was a genuine transaction. xxxx xxxx xxxx 18. The main issue is whether there was sufficient material before the assessing officer to take a prima facie view that income o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which the Supreme Court came to record:- "33. In our view the assessee disclosed all the primary facts necessary for assessment of its case to the assessing officer. What the revenue urges is that the assessee did not make a full and true disclosure of certain other facts. We are of the view that the assessee had disclosed all primary facts before the assessing officer and it was not required to give any further assistance to the assessing officer by disclosure of other facts. It was for the assessing officer at this stage to decide what inference should be drawn from the facts of the case. In the present case the assessing officer on the basis of the facts disclosed to him did not doubt the genuiness of the transaction set up by the assessee. This the assessing officer could have done even at that stage on the basis of the facts which he already knew. The other facts relied upon by the revenue are the proceedings before the DRP and facts subsequent to the assessment order, and we have already dealt with the same while deciding Issue No. 1. However, that cannot lead to the conclusion that there is non-disclosure of true and material facts by the assessee. xxxx xxxx xxxx 35. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssment for any assessment year: Provided also that the Assessing Officer may assess or reassess such income, other than the income involving matters which are the subject matters of any appeal, reference or revision, which is chargeable to tax and has escaped assessment. Explanation 1.-Production before the Assessing Officer of account books or other evidence from which material evidence could with due diligence have been discovered by the Assessing Officer will not necessarily amount to disclosure within the meaning of the foregoing proviso. Explanation 2.-For the purposes of this section, the following shall also be deemed to be cases where income chargeable to tax has escaped assessment, namely :- (a) Where no return of income has been furnished by the assessee although his total income or the total income of any other person in respect of which he is assessable under this Act during the previous year exceeded the maximum amount which is not chargeable to income-tax ; (b) Where a return of income has been furnished by the assessee but no assessment has been made and it is noticed by the Assessing Officer that the assessee has understated the income or has claimed exces ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing with the reliance which was placed on that provision by the Revenue ultimately came to observe as under:- "45. In our view this is not a fair or proper procedure. If not in the first notice, at least at the time of furnishing the reasons the assessee should have been informed that the revenue relied upon the second proviso. The assessee must be put to notice of all the provisions on which the revenue relies upon. At the risk of repetition, we reiterate that we are not going into the merits of the case but in case the revenue had issued a notice to the assessee stating that it relies upon the second proviso, the assessee would have had a chance to show that it was not deriving any income from any foreign asset or financial interest in any foreign entity, or that the asset did not belong to it or any other ground which may be available. The assessee cannot be deprived of this chance while replying to the notice." The appeal thus came to be allowed in the following terms:- "48. We accordingly allow the appeal by holding that the notice issued to the assessee shows sufficient reasons to believe on the part of the assessing officer to reopen the assessment but since the revenue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n was addressed in the backdrop of certain related proceedings which formed the subject matter of ITA No. 204/2020 and where the principal question was whether an undertaking or the incurring of an obligation by the petitioner would amount to an international transaction and thus falling within the scope of Section 92B of the Act. 15. While we do not propose to unnecessarily burden this judgment with complete details pertaining to that limb of the litigation, suffice it to note that the solitary issue which arose in those proceedings was whether the undertaking as furnished by the petitioner would amount to a corporate guarantee or a mere obligation and which could be viewed as an international transaction. A Special Bench of the Income Tax Appellate Tribunal [Tribunal] which had come to be constituted to examine that issue ultimately came to conclude that the petitioner could not be said to have extended a corporate guarantee to support the activities undertaken by NNPLC. 16. Upon answering the aforesaid question, the matter came to be placed before the Bench of the Tribunal which had ultimately remitted the matter for the consideration of the AO to decide whether the incurring ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the obligation of informing the petitioner of their intent to invoke and reply upon the Second Proviso. 22. However, we are undoubtedly confronted by a clear and categorical finding rendered in the first round of litigation and where the Supreme Court had in unequivocal terms held that the material on the basis of which the AO formed an opinion to reopen was sufficient. We are thus of the firm opinion that sufficient material existed before the AO and which would have justified the power to reassess being exercised. 23. That leaves us only to deal with Mr. Jolly's submission that the entire action is based on a wholly incorrect reading of the DRP's order. It was his submission that the said order has been misconstrued and misinterpreted and thus the impugned action liable to be set aside on this score. 24. We find ourselves unable to sustain this submission bearing in mind the undisputed fact that this was not a contention raised, urged or canvassed either before this Court or for that matter before the Supreme Court. In fact the Supreme Court had answered question (i) in the affirmative upon noticing the reliance which was placed by the AO on the order of the DRP. The petition ..... X X X X Extracts X X X X X X X X Extracts X X X X
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